Ed Miliband has promised to rescue Britain’s struggling middle classes by boosting their living standards as he warns that the “cost-of-living crisis” will last for at least another five years.
Writing in The Independent, the Labour leader insists that living standards are “the greatest challenge of our age” and will be at the heart of his party’s general election campaign next year. He rejects calls from within his own party for him to change his strategy because the economy is improving.
He promises that a Labour government would champion the “hollowed-out” middle classes, by creating the decent, secure jobs they need and ensuring they benefit from the recovery. His appeal to this group will be compared to Tony Blair’s pitch to “Middle England” before he won his 1997 landslide, as Labour aides deny claims that Mr Miliband is focusing on the party’s “core vote”.
In a speech tomorrow, Mr Miliband will unveil plans to allow Britain’s “great cities” to become powerful “engines of growth” by devolving new powers from Whitehall so they can create “quality jobs”.
His refusal to depart from his cost-of-living agenda will worry some Labour MPs, who fear it is a diminishing asset because wages are expected to rise by more than inflation later this year.
In his article, Mr Miliband seizes on new figures from the Office for Budget Responsibility (OBR), the fiscal watchdog, showing the traditional link under which earnings rise in line with economic growth is broken and will remain so well into the next five-year Parliament. “Real earnings will on average increase at only half the level of economic growth in 2015 and will still lag behind even in 2018,” he says.
He also warns that “middle-income Britain” will not enjoy the fruits of an improving economy without the reforms that Labour plans, because higher wages “will disproportionately benefit those at the top.” Mr Miliband dismisses George Osborne’s “conversion” last week to the goal of full employment. He argues that the Conservatives will not deliver on the promise because they have “an economic ideology built on low pay, low skills, low prospects and … low productivity”.
Labour doubts about his strategy may be reinforced by a study by the Social Market Foundation think-tank of the middle 20 per cent of the income ladder – between £21,100 and £41,200 a year in 2011-12. It suggests the squeeze on living standards has been exaggerated.
Emran Mian, the foundation’s director, said: “In reality the middle has coped surprisingly well since 2007-08… Even in the teeth of the recession, two-fifths of them moved up the income distribution. Just as many managed to stay where they were. By 2011-12, the middle as a whole had the same earnings in real terms as they did in 2007-08. With the recovery under way, their prospects are likely to improve further.”